Credit Report Basics

Do you ever wonder how lenders decide who gets a loan and who doesn't?  Ponder why you were turned down for that credit card? Think that you might file for bankruptcy and hope no one will ever know?  If so, you need to know more about your credit report, how it works, and how it can affect your financial future. The following information gives basic information about what a credit report is, who uses it, how to obtain a copy of your own, and correcting a mistake if you find one.

What is my credit report?

Your credit report is a compilation of financial data about you. Credit bureaus across the country compile credit information from banks, finance companies, merchants, credit card companies, and other creditors and enter it into a centralized computer system. Your report contains personal information such as your address, social security number, and birth date. It may also contain information about your employment and income, spouse’s information, former addresses, etc. More importantly, your credit report file details information about credit transactions and balances due, payment history, suits, judgments and tax liens. Your record also shows if you have declared bankruptcy. This is especially important to note, because this information will not be removed from your file for seven to ten years!

Who uses my credit report?

A potential creditor will usually check your credit report when you apply for a loan or credit card or rent an apartment. The lender or company will request a copy of your report and make their lending decision after reviewing your history. The lending company, not the credit bureau, makes the decision about whether you are approved or not. Although the credit reporting industry claims they do not sell credit scores to employers, there is nothing in the law to prohibit employers from obtaining a credit score if you give them written permission.  There are no reliable sources of information with respect to how often potential employees are asked to grant permission. Your report cannot be used by just anyone who wants information about you (such as friends). Anyone requesting a copy of your report must want it for an approved purpose and must be able to provide proof that they are a legitimate company with the right to view your report.

Can I see a copy of my credit report?

Yes, and in fact, it is a good idea to periodically check your credit reports to be sure that the information is correct. Congress created the 1971 Fair Credit Reporting Act, which gives you the right to see a copy of your re- port. As of March 1, 2005, you can order a free credit re- port one time each year. The three largest credit reporting bureaus are using one central address to provide this information. Do not contact the credit bureaus directly to obtain your free annual credit report.

 

To order your free credit report:

 

·         Visit www.annualcreditreport.com;

·         Call 1-877-322-8228; OR

·         Print the form at http://www.ftc.gov/bcp/conline/edcams/credit/ docs/fact_act_request_form.pdf and mail it to:        Annual Credit Report Request Service

PO Box 105281

Atlanta, GA 30348-5281

 

Be cautious about companies offering “free credit reports” on slick TV commercials, on websites or in magazine advertisements. Many of them have a snag such as having to pay a hidden fee for some other service they offer or requiring a subscription of some kind. You do not need a company to obtain a free

credit report for you; can you do it yourself. The contact information listed directly above is the official place to go to get your free credit report.

You can contact the three large credit reporting bureaus directly to request a free credit report every twelve months if:

·         you have been turned down for credit, employment or insurance within the last thirty days due to something in your credit report;

·         you are unemployed and plan to seek employment within 60 days;

·         you are on welfare; or

·         your report is inaccurate due to fraud. Otherwise, you usually have to pay a small fee to obtain

a copy of your report.

 

The three largest credit bureaus are:

•             Equifax

P.O. Box 740241

Atlanta, GA 30374

1-800-685-1111

 

•             Trans Union

2 Baldwin Place, P.O. Box 2000

Chester, PA 19022

1-800-888-4213

 

•             Experian

P.O. Box 2002

Allen, TX 75013

1-888-397-3742

 

There is also another large credit bureau called Innovis Data Solutions. This bureau differs from the other three main ones, however, because it sells your credit information to companies that compile mailings for unsolicited mail, including credit cards. You can also look under “Credit Bureaus” in your local yellow pages.

There is a mistake on my credit report. Now what? If you find an error on your credit report, contact the credit bureau. If the information is very old (more than seven to ten years), you should ask to have the information deleted. If it is a more recent error, provide as much information as you can about the situation. The bureau must investigate the problem. You also may try contacting the reporting party to see if they can help you resolve the situation. If you cannot resolve the issue, you can file a written statement of up to 100 words with the credit bureau telling your side of the story.

Note:

Beware of “credit repair” scams that promise to erase your bad credit history. You can take the same steps they will take to remove incorrect information without having to pay a high fee. Information that is legitimate, however, cannot be magically erased--by anyone!

 

Mobile Check Deposit

by Andrew Zumwalt, M.S., Associate State Specialist, Personal Financial Planning, University of Missouri Extension

What is it?

Some financial institutions are now allowing remote mobile check deposit. Customers of these institutions can use their smartphone to deposit checks into their accounts anytime and anywhere.

What are the advantages?

Consumers can deposit checks from anywhere with their smartphone and internet access. This avoids the need to visit a bank or ATM.

What is required?

·         A bank that allows mobile check deposit

·         A smartphone

·         An app (usually free) from your bank installed on your smartphone

·         A check made out to you and endorsed by you

How does it work?

The smartphone app uses the smartphone’s camera to capture the front and back of an endorsed check. The app sends the images to the bank, which then processes the check normally.

What kind of smartphone can I use?

Generally, apps are developed for either the iPhone or Android devices. This may expand in the future to include Windows phones.

What should I do with the check I cashed with the smartphone app?

Follow the instructions given by your bank. Typically banks will ask that you mark the check as being electronically deposited (either by writing “electronically deposited” on the check or by putting a sticky note on the check). Banks will also ask that you hold onto the check for a short period of time (14-30 days) until the check clears with no errors (example: check bounces). After that period of time, shred or otherwise securely dispose of the check.

How should I endorse my checks?

Follow the instructions given by your bank. Often, banks will require your signature, followed by the phrase “For Deposit Only” and your account number. However, in order to ensure that your check is deposited quickly, follow your bank’s procedure.

If you are endorsing and cashing a large number of checks or you have trouble remembering the instructions, you may want to consider ordering a small custom stamp with the endorsement information required by your bank (without your signature). This reduces the chance for error.

What happens if I make an error endorsing the check?

Your bank will have its own policies, but most banks will require that you either visit a physical branch to deposit the check or that you mail the check to the bank.

What if I don’t have a bank account?

While not available currently, consumers who use prepaid debit cards may soon have the ability to cash checks with their smartphones and have the money deposited onto their prepaid debit cards.

What else can I do with the app on my smartphone?

Often, the bank apps allow customers to pay bills, check balances, and transfer money between accounts. If your bank is associated with a brokerage, you may also be able to place trades.

Resources:

Please note that these are the policies of individual banks and may not represent the policies of your bank. They are also open to change at any time. They are listed here as possible resources and are not meant to show preference for certain banks.

content.schwab.com/mobile/iphone-deposit.html?section=faq

redfcu.org/pdfs/RemoteDepositFAQ.pdf

fidelity.com/products/iphone/ChkScanFAQ.shtml

Ways to track spending

by Lucy Schrader

Spending money is easy.  Keeping track of it takes more time.  The time, however, is very well worth it to help you manage your finances, stress and life.  In this fast world of automatic withdrawals, credit cards, debit cards, quick buys and on-line purchasing, people do not always realize where their money is going.   This holds true for adults, teens and youth. 

Tracking your expenses gives you a better picture of what you buy, helps you decide what you want and helps make a financial plan for you and your family.  It is so important to involve kids and teens and help teach them to track their money, too!

From here, you can make a budget for how you want to spend and save your money.  When you know what you want to do (get out of debt, save for a trip, save for college, buy day-to-day items), you see what is important to you and what is not.   You can decide to save on things that are not as important to you, so you can have and do the things that are important to you.

Where to start?

The hardest part is getting started.  Don’t worry… the first few months may not be completely accurate.  That’s all right!  As you get going, you’ll get a better idea of what works and what does not work.  If you keep it simple, you are more likely to follow through.  I use a system that would make an accountant faint.  But it works for my family and I understand it.

When you track, you account for all of your income sources and your expenses.  You make notes of when you get money and when you spend or save it.  You have several different options.  If you don’t know where to begin, start simple like making columns on paper or a spreadsheet.  You can expand as you understand your finances better.

Here are a few examples of how to track your expenses (note: These are just a few ideas. This is not an endorsement for specific companies and their products, but just some examples.):

• Paper or a notebook
• Spreadsheets (Microsoft has free templates to download)
• Templates (Managing Your Money handout with fillable worksheets http://extension.missouri.edu/p/gh3830; Google docs has different spreadsheets to download and use— view a sample at https://docs.google.com/previewtemplate?id=0As3tAuweYU9QcHlVM3hrY2tocEkzUWVjVVlqUUdfTUE&mode=public)
• Accounting programs that track and do more (Quicken, QuickBooks)
• Free on-line programs—sites might have ads from lenders and other vendors  (Mvelopes http://www.mvelopes.com/; Mint.com https://www.mint.com/)
• Paid money management systems
• Texting services—tied to your checking/account(s), you text your expenses and get your updated bank balance, may have a fee (Chext http://www.chext.net/)
• Banks, lending institutions and credit cards may have budget systems to help you track your expenses
• Or make one up like I did 

Before you sign up for a money management system, find out the following:

• Where is your personal information going and how is it used?
• Can you enter your information safely over public Wi-Fi (what kind of security does the system have)?
• Do you want a system that you download to your computer or do you want to be able to enter information from wherever you are (using your phone, laptop, tablet, computer, etc)?
• What is the cost?
• If it is free, will you get ads or other obligations?
• Can more than one person enter expenses from different places (if you need this as a family)?  (For example, one of the fee-based texting services lets more than one person enter amounts from different phones, so a family with a joint account can stay current with their balances.)

Remember that it can take several weeks or months to get into the full swing of tracking your expenses. 

• Start somewhere (even in the middle of the month)
• Small steps make a big difference
• Time upfront can save you time and money later
• Simple is often better—you’re more likely to use the system.

One person decided he would start with just four categories on a spreadsheet.  These four categories gave him a starting point and helped him see where his money was going and how he could make changes.  Here are his four categories:

• Income
• Necessities (food, rent/mortgage, transportation, medical, some clothes, etc)
• Fun and entertainment
• Investments and savings

Again, tracking your expenses isn’t about cutting out all of your fun.  It’s to help you decide what is important to you and what you can do later.  Budgeting can help reduce financial and family stress.

Involve youth and teens

Youth and teens have a wide range of income levels.  Some get small allowances, some get large amounts, others work and some have no money for themselves.  It’s very important for them to understand finances and how to stay within their means.  Setting a good example and involving them early is a great place to start.

Because I recently started tracking expenses, I’m paying more attention to our kids’ habits, too.  I am very aware that my son likes to spend his money, so we’re starting a system on paper with columns for him.  Pokémon does not grow on trees.  For now, I am going to pay him $1-2 per month to track.  I want him to get into the habit of it and see how important balance and living within his means are.

You can use books to help get conversations going about money and how to track spending.    Here are just a couple of examples:

For youth:

Alexander, Who Used to Be Rich Last Sunday by Judith Viorst and Ray Cruz

For teens:

Budgeting Smarts: How to Set Goals, Save Money, Spend Wisely, and More  by Sandra Donovan

By tracking your spending you’re making a great step in taking charge of your money and helping you reach your goals!

For Extension financial programs in your area, check with your local Extension Center.  In Missouri, you can find Extension Specialists and office contact information at http://extension.missouri.edu/index.aspx

 

Lucy Schrader
HES Associate State Specialist and
Building Strong Families Program Coordinator
University of Missouri Extension
162 Stanley Hall
Columbia, MO  65211
573-882-4071 or SchraderL@missouri.edu

http://extension.missouri.edu/bsf

 

Financial Planning for College Students

Around the country, college students are beginning a new school year in the midst of rising tuition and living expenses.  Many college students are on their own for the first time and, for many of them, that includes being on their own financially. They are expected to earn money and manage their own finances along with their busy college schedules and social lives. College financial plans don’t have to be complicated, but they are necessary. Taking a few simple steps now to manage personal finances will lead to much more positive outcomes down the road.

Here are some financial tips for college students beginning the new school year:

• Buy used textbooks or e-books when possible and compare textbook prices online.
• Don’t be tricked by credit card offers that come with a bag of candy, free shirt or free pizza.
• Before signing a lease, be sure you understand the entire contract.
• Educate yourself about student loans – know what types of loans you have, how much you owe, your interest rate, and what your monthly payment will be. For information on your federal loans, visit:  http://www.nslds.ed.gov
• Before turning to private loans to help pay for your education, visit your financial aid adviser to be sure you have exhausted all federal loan opportunities.
• Stay away from payday loans.  They carry very high interest rates and can trap you in debt for years.
• Shop around for a bank account.  Different banks and credit unions offer a wide variety of products – from free checking to low rates on loans. You also want to consider convenience – it is helpful if there is an ATM or branch on campus or close to where you live.
• Every time you are about to spend money, ask yourself if it would be better spent on something else or saved for a rainy day.
• Don’t carry your social security card in your wallet, and don’t give your Social Security number to people that don’t need it. The only thing thieves need to steal your identity is your Social Security number.
• Watch your eating out, entertainment and clothes spending carefully.
• Track spending to help avoid buying more than you can afford.
• Time is your best friend when it comes to saving for retirement – start saving now if you have a job and can invest a little for retirement.

Ryan H. Law, M.S., CFP®, AFC®

 

Personal Financial Planning Department

Office for Financial Success Director

University of Missouri Center on Economic Education Director

 

162 Stanley Hall

University of Missouri

Columbia, MO 65211

 

573.882.9211 (office)

573.884.8389 (fax)